Some weeks ago, my daughter-in-law decided to buy a car to replace the “old reliable” she had been driving for the last couple of years. The “old reliable” was a pitch black Mercury Sable with 200k+ miles on it. So, you know, it was due to fall apart at any moment. Upon revealing her intentions, she was immediately assailed by a variety of helpful folks giving her much homespun wisdom on the topic. I added my voice to the group, but later, I thought that this might actually be a good blog topic. After I realized that this topic has been very widely discussed, I then decided to proceed anyway and I gathered up enough reliable information for a good start. So, here goes…
The first important question that I came up with was why replace your existing car? (Just kidding…) How do you intend to pay for your car? This is an important question since it will no doubt affect the decision making process. If you intend to pay cash for your vehicle and do not absolutely have to obtain a new vehicle, then I strongly suggest you consider attending a private auction of repossessed vehicles. These auctions occur on a regular basis and careful bidders are usually rewarded. Most auctioneers display the auction vehicles in advance and bidders have sufficient time to look up the values of each item on the NADA website, KBB website, or any other trusted source. Often, one finds cars is relatively good condition and the winning bid is rarely more than the market value of the vehicle, and more often, it is considerably less. (I suggest you bring a three-day temp. tag with you which can be obtained from the local tag agency for $10 or so since most auctions require you to drive your “prize” off the lot once you have paid for it. You will have to pay tax on the title transfer so consider that cost when bidding).
If you prefer the dealerships, then familiarize yourself with the available inventory each dealer has. Pay a visit and bring a reliable friend, but DON’T BRING your purse or wallet! You are just looking…the less time you have to think between shopping and buying the more likely you are to make a mistake. If you are looking for a foreign car, go to a domestic car dealership and look at its trade-ins (You can bet they want to move those ASAP). Likewise, if you want a domestic, go to a foreign car dealer (same rule applies in reverse). Remember: the less attractive the color of a car, the more savings may be obtained in the deal.
If you are going to finance your purchase, then give your local bank a try first. Look at and make a note of the retail values of the cars you wish to buy. Put a loan amortizer app on your phone. Run a copy of your own credit reports (which can, once yearly, be obtained for free from www.annualcreditreport.com) and look ‘em over. If there are mistakes on the reports, bring those to the attention of the credit reporting agencies so they can be removed. Mistakes are expensive! Then, take your reports, last six months of pay stubs, tax return from last year (or W-2), and have your bank loan officer look them over. First advise the bank loan officer to not run your credit until after the two of you have discussed likely terms of the loan. Most bank loan officers can discuss potential loans and their terms without running your credit. This will allow you to use your amortizer app to see what your expected car payment will be before you go any further. If your bank officer declines, then get up and leave. There are other banks (and you may consider moving your banking business to them as well). Once you have a good idea of the terms of the loan, then you may wish to seek “pre-approval” of your potential financing. Banks are different, but sometimes pre-approval will result in the bank giving you a conditional check for the loan that is good for thirty days for use at the car dealership. If you do not use the check and return it to the bank, the loan never occurs. Once that is accomplished, then you may compare the conditional deal you made with the bank with the various financing offers that you will hear at the dealerships. WARNING: make sure to be clear with the car salesman and/or finance manager that YOU DO NOT WANT THEM TO RUN YOUR CREDIT until they have told you all the terms of the potential financing and you have double-checked their offers with your amortizer app. Make sure you will have an affordable monthly payment if you have decided to go with the dealership’s financing partner and not use your bank check. Do yourself a favor and try to keep your monthly car payment at, or below, approx. 20% of your gross monthly income. The exquisite agony of dealing with a car salesman is too intense of a topic to include in this blog so, if there is general interest out there, I will handle that topic at another time. Happy Hunting!